~Types Of Preference Shares 👇~ Cumulative Preference Shares: • a type of share that gives its owner the right to receive an amount of money dividend. • if the money (dividend) cannot be paid in time, it must be paid later. For instance: In a year when the business is not profitable, the dividend will be reported as ARREARS and will be paid in full when the business becomes profitable. Non-Cumulative Preference Shares • ⁠a type of shares whose dividend dose not accumulate from one year to another. For instance: Where a company fails to pay dividends as a result of not profitable, no dividend will be paid for that year nor will it be carried forward. Participating Preference Shares: • ⁠holders are entitled to further percentage of dividend after the ordinary holders have received theirs. • ⁠holders have the right to participate equally in the sharing of surplus dividend different from their fixed dividend. Non-Participating Shares:⁠ • ⁠the opposite of participating shares, holders are not entitled to further dividend after ordinary holders have been paid. Redeemable Preference Shares: • holders are first or prior claims of dividend before all other preference shares. • ⁠are types of shares that can be bought back by the issuing company after a specific period. NB: Redemption: recovery/repurchase/ bought back⁠ •

Here's a quick review:

✅ Correct

• 1. Cumulative Preference Shares: Your description and example are accurate. If dividends are missed, they accumulate and must be paid before any dividends to ordinary shareholders.
• 2. Non-Cumulative Preference Shares: Your definition and example are correct. Missed dividends are lost and do not accumulate.
• 3. Participating Preference Shares: This is accurate. Holders receive their fixed preference dividend and then an additional share of profits, often after ordinary shareholders have received a certain dividend.
• 4. Non-Participating Shares: This is also correct. Holders only receive their fixed preference dividend and no further share of profits.

❌ Needs Correction

• 5. Redeemable Preference Shares:
  • The statement "holders are first or prior claims of dividend before all other preference shares" is incorrect. The term "redeemable" refers to the company's right (or obligation) to buy back the shares after a certain period or date. It does not inherently give them priority over other types of preference shares regarding dividend payments. All preference shares generally have priority over ordinary shares for dividends, but priority among different classes of preference shares depends on the specific terms of their issue, not just whether they are redeemable.
  • The second bullet point, "are types of shares that can be bought back by the issuing company after a specific period," is the correct definition of redeemable preference shares.